Campbell is increasing debt

Vancouver Sun

Face it, we’re going into hock to get the golden decades’ new subways, buses and hospitals

By Miro Cernetig

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Premier Gordon Campbell may have declared “the fiscal cupboard is bare and currently hangs on a wall of deficit spending” in last week’s throne speech. But that doesn’t mean he won’t be spending billions of dollars on infrastructure, some of it sped up to goose the shrinking economy.

In the budget update for 2009, the government is promising to spend $21.6 billion building everything from new bike paths to hospitals and the ever-promised Evergreen rapid transit line.

It pretty much means Campbell is sticking by his earlier promise to spend on public transit, most notably the $14 billion, 10-year rapid transit plan for British Columbia.

But it’s a bit murky, however, where all that money will come from for all those new buses and trains.

For example, the budget says over the next three years the province is kicking in $249 million for the Evergreen Line, along with $454 million from Ottawa. But Finance Minister Colin Hansen offered no hint of how TransLink, the agency running Metro Vancouver’s public transit system, will raise its share. The agency says it needs $450 million more a year to make the premier’s public transit dream a reality.

One thing that is crystal-clear, though, is the bulk of the infrastructure promised will in the end be realized by going much deeper into debt. The provincial debt load will go from $38 billion in 2008-09 to a record $52.8 billion by 2011-12.

That’s a big number.

In 2011-12, when the provincial debt will soar past the $50-billion mark, all of the provincial government’s revenues will amount to $41.1 billion. That’s a shortfall of more than $10 billion. In a sense, the province is creating what is called a structural deficit when it comes to infrastructure — that is, there’s no sign that it can ever be built without floating it all on an ever-deeper sea of red ink.

Part of the new debt is Olympic-related, too. The budget update informs us that in order to have Ottawa pay the $900-million security bill to hold the Games, the province agreed to pump an extra $165 million into federal-provincial infrastructure projects, in essence a federal clawback.

The government prefers to look at this deepening sea of red ink to keep our cities and towns working with a more flattering lens, though. It wants the debt compared to the size of the total economy. Using that ratio, taxpayer-supported debt will go from 13.3 per cent of the economy this year, to 18.1 per cent in 2011-12.

Obviously that’s not a good trend. But count on the Liberal government reminding us it is still a smaller debt burden than during “the dismal decade,” as they call it, when New Democratic governments took the debt load to 21.3 per cent of the economy.

Don’t get lost in the numbers and political rhetoric, though.

What’s happening is simple. Campbell, despite his stated aversion to debt, is increasing it. He’s gone from fiscal conservative to being a classic Keynesian, going into hock to stimulate the economy out of the doldrums and, it is hoped, create growth that will get us back in the black.

The upside of this is we get the shiny new infrastructure that Metro Vancouver and the province badly need. If there’s one message from this budget update, it’s that there seems to be no appetite for any major delays in these projects, something that was a distinct possibility given the deep downturn in the government’s revenues during the recession.

All the spending also means jobs. Thousands of them, all connected to building that infrastructure.

Finance Minister Colin Hansen promised in the first phase that “the projects approved to date are expected to create 21,600 direct jobs. … Over three years, we expect to see a total of 88,000 jobs — jobs that pay bills and put food on the table.”

Even with that multi-billion-dollar splurge on capital spending, however, we’re not exactly going to be back into “the golden decade,” as the premier calls his plans for British Columbia, any time soon.

The government predicts the unemployment rate will rise to 8.3 per cent in 2010, and slowly reach seven per cent in 2013, just in time for the next provincial election.

By then, we and the premier will have lots of shiny new infrastructure to boast about — and a provincial debt that will be $59.9 billion, with no decline in sight. In the “golden decade,” unless new ways are found to capitalize infrastructure, British Columbia’s fiscal cupboard will look barer than ever.